Billionaire investor Carl Icahn said on Friday he will make a $1.19 billion bid to take a majority stake in Fairmont Hotels and Resorts, in a move to gain control of the luxury hotelier and force a sale.
Icahn, who last month unveiled he had taken a 9.3 percent stake in the company, will offer $40 a share in cash to take his holdings to 51 percent.
"The offerors believe that Fairmont and its shareholders would benefit if the company were acquired in its totality by a larger hotel operator that is more able to more effectively take advantage of economies of scale," said a statement from Icahn Partners LP and Icahn Partners Master Fund LP.
Shares of Fairmont rose $1.80, or 4.64 percent, to $40.59 on the New York Stock Exchange on Friday. In Toronto, the stock was up C$2.04, or 4.5 percent, at C$47.26 after touching a year high of C$48.34.
Fairmont quickly rejected the offer, calling it "coercive" and said it does not treat all shareholders equally. The hotelier said its board of directors would recommend shareholders reject any formal offer that arrives.
"A tender offer for shares that, were it successful, would give Mr. Icahn control of 51 percent of the company without paying a takeover premium to all shareholders would be unacceptable," Fairmont chief executive William Fatt said in a statement.
The Toronto-based owner of more than 80 hotels in North America, Britain, Kenya and the United Arab Emirates has a market capitalization of $2.8 billion.
Last month, Icahn reported in a regulatory filing that he scooped up a stake in Fairmont and aimed to boost the stock value, possibly by urging management to seek a buyer.
On Friday, Icahn made it clear that he seeks to gain more control at Fairmont and will push for an outright sale.
Fairmont had said it was willing to meet with Icahn and discuss ways to boost the company's value and Fatt reiterated on Friday that it was already working on initiatives to do that.
The hotelier is considering continuing a share buyback program and selling off non-core assets.
Analyst David Katz at CIBC World Markets noted that Fairmont's stock has rallied since Icahn's interest was made public and the offer comes as little surprise to the market.
"This company has been speculated about for the last 6-12 months as a prospective target," he said. "It (the latest offer) clearly puts the story in play. And the probability of other higher offers just went up."
Fairmont has disappointed analysts with its mediocre performance at a time when the luxury hotel segment is the best performing in the lodging industry.
The company, North America's biggest luxury hotel chain, reported lower third-quarter profit in October amid weakness in its Canadian operations as well as its Bermuda and Mexico portfolio.
"Their performance is just OK in a very positive fundamental environment," Katz said.
The offer price of $40 a share represents a 24.2 percent premium over the average closing price of Fairmont shares, which was $32.20 per share on the NYSE for the 60-day period ending on the last trading day prior to the November 7 filing, Icahn said.
The Icahn group said it would be willing to enter into talks to extend the length of its offer to accommodate a sale process.
Icahn, a New York-based billionaire, is among the most well known activist investors who has pushed for changes at companies such as Kerr-McGee, Blockbuster and most recently Time Warner Inc.